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Johnson's Russia List
17 September 1998
[Note from David Johnson:
1. Reuters: Peter Graff, ANALYSIS-Russia Communists keep all
2. Ray Smith: JRL-2376 Hough on Ryzhkov.
3. National Press Institute (NPI) report on regional newspapers
and the crisis.
4. New York Daily News: Lars-Erik Nelson, Russian Boss' First Task:
Feed Starving Masses.
5. Thomas Graham testimony on Russia before the Senate Foreign
6. Moscow Times: David McHugh, Appointments Widen Split in Cabinet.
7. Moskovskiy Komsomolets: Yuriy Zaynashev, "James Bond in Russia:
Yevgeniy Primakov--the Spy Who Has Come in From the Woods."
(Primakov To Be Nonpolitical Premier).
8. Reuters: Andrei Khalip, Russian media feel pinch in economic
ANALYSIS-Russia Communists keep all guessing
By Peter Graff
MOSCOW, Sept 16 (Reuters) - Russia's Communists are neither hailing nor
condemning the government of newly-appointed Prime Minister Yevgeny Primakov,
leaving analysts guessing whether their ambiguous stance is a clever plan or a
sign of paralysis.
The Communists, who have been in fierce opposition to successive governments
since the fall of the Soviet Union seven years ago, are closer now to the
reins of power in Russia than at any point since then.
Whether they will embrace that new role or remain in opposition is a question
that could decide the shape of Russia's political landscape as the country
enters a tough winter crippled by economic chaos.
Some analysts say the Communists, having won a fierce battle over the choice
of prime minister, may have lost their reason for being by abandoning their
role as the principal critics of the post-Soviet Russian regime.
Primakov, confirmed in office by the Communist-dominated lower house of
parliament last Friday, appointed a Communist, Yuri Maslyukov, as his chief
economic guru, and a Soviet-era banker, Viktor Gerashchenko, to head the
The appointments have been widely interpreted as a victory for the Communist
"Maslyukov and Gerashchenko. It is precisely the government (Communist Party
chief Gennady) Zyuganov himself would have named if he were elected
president," Andrei Piontkovsky of the Centre for Strategic Studies think-tank
said on Wednesday.
"You can see how happy (the Communists) are by just looking at their faces,"
But Alexei Kara-Murza of the Russian Academy of Sciences' Centre for the
Theoretical Study of Russian Reforms said victory could spell disaster for a
party that forged its post-Soviet identity as the "party of malcontents."
"The Communist Party is a very strange organisation. They have no programme,
they have no manifesto. They are simply anti. For them nothing is positive. If
they supported something, everybody would leave," said Kara-Murza.
The Communists openly supported Primakov on Friday but since then they have
been more coy, vaguely praising his personnel decisions but saying they will
withhold judgment on the government as a whole until its plans are under way.
On Wednesday, Primakov appointed centrists Alexander Shokhin and Vladimir
Ryzhkov as deputy prime ministers immediately below the Communist first
The Communists' response was cautious. Zyuganov said he wished the new
appointees well, but would only support them if he approved of their
"For anything good that happens (the Communists) will say it was Maslyukov.
For anything bad, they will blame these others," said Piontkovsky.
But Kara-Murza said such a tactic can only go so far. The Communists have
vowed to go ahead with planned mass protest rallies on October 7. But if they
themselves are identified with the government, it is not clear whom they can
"The Communists have to bring people out into the streets. Who are they going
to protest against? Shokhin?" Kara-Murza said.
"For the mass consciousness, the powers are one: the Kremlin. The powers must
be either good or bad...You cannot blame everything on some deputy prime
minister who, under the rules, reports to Maslyukov who is a Communist."
The Communists' core constituency of the poor and elderly is likely to be
pushed towards more radicalism by the economic crisis. Russia is broke, and
Primakov's government will face a tough choice between printing money and
launching inflation or failing to pay pensions, salaries and other debts.
Whichever path the government takes -- it is likely to seek a compromise
somewhere in the middle -- millions will be hurt.
Primakov's greatest asset may be his ability to disarm the Communists by
coopting some of them into key positions.
"Primakov is a very clever, sly person. He is a figure who can make it
difficult to criticise the authorities," Kara-Murza said. "I think he will
continue reforms but the Communists will not be able to protest because they
themselves picked him."
Date: Wed, 16 Sep 1998
From: email@example.com (Ray Smith)
Subject: JRL-2376: Hough on Ryzhkov
If we are, as Jerry Hough suggests, to use this crisis to really rethink
the history of the last dozen years, let's not start by looking backward
at the wrong people with rose-colored glasses. Gorbachev and Ryzhkov
began as allies in the days when their idea of reform was to add a
quality control step at the end of the production line (they expected to
have goods ready to compete on Western markets in about six months) and
to cut alcohol consumption. Their paths diverged as Gorbachev's views on
reform radicalized. He broke the power of the communist party, something
Ryzhkov could never countenance. My impression of Ryzhkov is that he is
a decent human being who was totally clueless about how to reform the
economy, which went into free fall while he was responsible for it. His
vision was of a CPSU-led command economy that worked more efficiently.
His chief contribution was to support Gorbachev on arms control because
he did understand that military expenditures had to come down drastically.
I think it is time we disabused ourselves of the notion that the West is
responsible for the state of the Russian economy, and that if we had only
given them (better advice, more investment, more money, etc.--you take
your pick), everything would be fine. The collapse of authority and
ideology that began during the Gorbachev era and continued under Yeltsin
produced a society about as corrupt and lawless as anything around. That
might have been predictable, but it is not the West's fault, and the West
cannot fix it. A number of market economy variants with different
emphases on degree of state ownership, social welfare, etc. have
functioned more or less successfully in the West. No modern economy has
operated successfully in a fundamentally lawless society. Using the
Russians as surrogates for our own ideological quarrels about which
socio-economic system is preferable neither advances the cause of
historical accuracy nor identifies the fundamental reform necessary if
Russians are to find a way to improlve their lives. That fundamental
reform requires protecting individual freedoms, but doing so in the
framework of a civic culture. Figuring out which Russian economists are
dancing on the heads of which ideological pins is pretty irrelevant to
Date: Wed, 16 Sep 1998
From: "Conrad Hohenlohe" <firstname.lastname@example.org>
Subject: NPI report on regional newspapers and the crisis
I am writing to draw your attention to a report prepared by the National
Press Institute (NPI) on the effect of Russia's financial crisis on
Russia's regional independent newspapers. The English-language report is
available at http://www.nyu.edu/globalbeat/pubs/npi091698.html.
The survey, as we expected, demonstrated that the independent media sector
was highly vulnerable to the financial shocks that have affected the entire
Russian economy. Newspapers have been hit in a number of ways:
--Production costs, from newsprint to printing costs, have risen, in some
--Russia's system of pre-paid 6-month subscriptions means that newspapers
must pay these higher costs out of pre-devaluation revenues; in addition,
1999 subscription drives are already underway, with newspapers locked into
now meaningless subscription prices;
--The lack of a functional banking system has further complicated payments
--Most troubling, the advertising market has entered a steep decline - from
30 to 50 percent over the past few weeks - with many newspapers reporting
that contracts signed for September and October have been cancelled.
As the enclosed report details, newspapers have responded in various ways,
from laying off staff to cutting back the number of issues to canceling
subscriptions to national news services. Newspapers have been desperately
spending their cash on newsprint, which has therefore become even more
expensive. Plans for capital improvements have been postponed or
In short, Russia's independent newspapers - those still in operation - are
in full crisis mode. At the moment, it is hard to predict with any degree
of certainty how the crisis will play itself out in the newspaper industry,
but clearly its long-term future is being decided now.
Center for War, Peace, and the News Media
New York University
New York Daily News
September 16, 1998
[for personal use only]
Russian Boss' First Task: Feed Starving Masses
By Lars-Erik Nelson
Former Secretary of State James Baker
has vivid, conflicting memories of Yevgeni Primakov, the ex-Communist
spymaster who has become Russia's latest, perhaps last-ditch, prime minister.
"He worked very hard to undermine our policies in the Persian Gulf War,"
Baker recalled yesterday. "He kept trying to cut some sort of deal with
On the other hand, Baker added, "I drank a lot of vodka with this guy. We
used to sit in Zurab Tseretelli's art studio [in the former Soviet Georgia]
knocking back tarkhuna, the Georgian vodka. He has a very engaging
Primakov's critics charge that he is a throwback to the Communist past and
that his appointment by President Boris Yeltsin — as well as some of the
long-time Communist functionaries Primakov has named to his cabinet —
spells an end to free-market reforms in Russia.
Baker, a staunch free-market conservative, gives Primakov the benefit of
"Russia's problems are political as well as economic," he said over the
phone. "If Primakov can form a government, it may bring about some needed
political stability. I don't see his appointment as a step forward,
economically, because there is bound to be some slowing down of the
reforms. But if that results in the development of a system of laws that
lets Russia put itself into better shape to embrace the free market, that's
all to the good."
Primakov's biggest asset, Baker said, is that he is not beholden to the
seven super-rich Russian bankers who have used the collapse of communism to
fatten their wallets at the expense of their fellow countrymen.
"Because of that corporate oligarchy, there has been no true free-market
system in Russia," Baker said. "It hasn't worked. That doesn't mean you go
back to the past. There will be more government intervention, but I'm sure
that Primakov will not profess communism again."
Primakov took office citing as his model not Vladimir Lenin or even the
reformist Mikhail Gorbachev, but Franklin Roosevelt, whose economic
activism during the Great Depression may have saved America itself from a
Critics charge that Primakov will simply print money and stimulate
inflation; but the same charge was leveled against Roosevelt. When we do
it, it's called deficit spending, more recently known as Reaganomics.
This is no time, in any case, to hold Russia to strict economic theories
about the money supply. Printing rubles may be bad economics, but
controlled inflation is better than uncontrolled starvation, and as winter
comes, ordinary Russians are out in the woods harvesting mushrooms and
berries — just as their hunter-gatherer ancestors did thousands of years
ago. They need food, not economics lessons.
Even though Primakov worked against U.S. policy in the Persian Gulf and
opposed the expansion of NATO into Eastern Europe, Baker does not regard
Primakov as anti-American.
"He has had a hard time accepting that Russia is no longer a superpower,"
Baker said. "But it's understandable that Russia will disagree at times
with U.S. foreign policy."
Under different circumstances, Primakov might not be the best choice. But
to quote Bertie Wooster, if there is one thing circumstances are not, it is
different from what they are.
Said Baker, "From a political standpoint, Primakov is the best Yeltsin can
Senate Foreign Relations Committee
September 15, 1998
Hearing on US Policy Toward Russia
Testimony of Thomas Graham
Senior associate at the Carnegie Endowment for International Peace
[Former top official in the US Embassy in Moscow]
For more than a decade, the centralized Russian state has been growing
weaker in a complex process of devolution, fragmentation, decentralization,
erosion, and degeneration of power, both political and economic. Some of
the weakening has been the consequence of decisions taken in Moscow aimed at
revitalizing and modernizing the country’s economy and political system.
Some has been the by-product of elite struggles in Moscow that has allowed
ambitious regional leaders to seize greater control over regional assets and
processes while compelling the more timid to assume greater authority and
responsibility in order to survive. And some has been the result of global
trends in technology, particularly information networks, that have tended to
diffuse power and erode the authority of central governments around the
world. The process has been surprisingly peaceful and undramatic since the
breakup of the Soviet Union, with the notable exceptions of the violence in
Moscow in October 1993 and the bloody war in Chechnya.
The slow crumbling of the centralized state has its positive and negative
sides. On the one hand, it is a necessary, but far from sufficient,
condition for the building of a market economy and pluralistic polity out of
the hypercentralized Soviet state. On the other, it has created immense
problems of governance that at times have raised concerns about the unity
and integrity of Russia. Much of the market reform and democratization that
has taken place - and despite recent setbacks, there has been enduring
progress in both areas - is a result of this crumbling, as are the problems
of growing crime, deteriorating public health and educational standards, and
declining social morale and morality.
It is an open question whether the continued crumbling, on balance,
retards the recovery of Russia and threatens the country’s unity or, on the
contrary, provides an opportunity for reviving, rebuilding, and unifying
Russia in ways radically different from its recent historical experience.
But it is a question that cries for urgent attention, for the current
political and economic crisis has accelerated this process. Indeed, it
suggests Russia is entering a new phase, which we could perhaps call the
beginning of the agony of the centralized Russian state.
Does the State Exercise Power?
Most Russians conceive of the state as an entity centered in Moscow
(“the Center”) with an administrative apparatus spread across the country
that stands above and apart from society. The Center’s chief function is
wielding power and authority through, among other things, the control of
institutions of coercion, the regulation of economic activity, and the
ability to command the loyalty of or instill fear in the citizenry. How
does the Center now stack up in this regard?
Not well, is the short answer.
The institutions of coercion, immensely powerful during the Soviet
period, are in abysmal conditions. A combination of slashed budgets,
neglect, corruption, political infighting, and failed reform has put the
military on the verge of ruin, according to a leading Duma expert on the
military.<br><br> .1Alexei G. Arbatov, “Military Reform in Russia:
Dilemmas, Obstacles, and Prospects,” International Security 22/4 (Spring
1998), pp. 83-85.
1 The Ministry of Internal Affairs (MVD), Russia’s police force, is
universally considered to be deeply corrupt and ineffective. Even the
Federal Security Service (FSB), the successor to the once feared KGB, has
faced serious budget constraints and experienced a sharp decline in its
ability to monitor and control society.
Moreover, the Center does not enjoy the monopoly over the legitimate
institutions of coercion it once did, nor does it necessarily reliably
control those nominally subordinate to the Center. Military commanders are
known to cut deals with regional and local governments in order to ensure
themselves uninterrupted supplies of energy and provisions. Some military
garrisons are supported with money from local entrepreneurs. Military
officers and MVD and FSB officials routinely moonlight to earn extra income
- or to cover for unpaid wages. As a result, the loyalty of the
institutions of coercion to the central government - even of the elite units
around Moscow - is dubious. While few observers believe the military, MVD,
or FSB is actively plotting against the Yeltsin administration, most doubt
any of them would protect it in a violent crisis, as elements of each did
during the violence of October 1993.
As is the case with the institutions of coercion, the national financial
system is in a shambles. It has collapsed for several reasons, including the
Center’s inability to collect taxes from both firms and individuals and its
effort to cover the budget deficit through foreign borrowing and the
issuance of various domestic debt instruments that amounted to little more
than a massive pyramid scheme. The Center has not been able to meet its
budget obligations for the last several years; in particular, wage arrears
to budget workers, including soldiers, doctors, teachers, and other
professionals, is a persistent problem. The sharply devalued ruble remains
the national currency, but the overwhelming majority of commercial
transactions, up to 80 percent by some estimates, take place outside the
monetized sector, in the form of barter or currency surrogates.
Finally, for the first extended period in modern Russian history, the
Center is neither feared nor respected. The lack of fear is evident in the
pervasive tax and draft evasion, as well as in such mundane matters as the
widespread non-observance of traffic regulations. The lack of respect is
evident in the general disregard for national holidays and monuments and the
pervasive public distrust of high-ranking government officials and central
government institutions, repeatedly recorded in public opinion polls. Over
the past year, the internecine struggles for control of the central
government among competing Moscow-based political/economic coalitions, most
notably the vicious conflict between groups led by Chubays and media magnate
Berezovskiy, fueled public cynicism about the Center. At the same time,
Yeltsin’s deteriorating health, both physical and mental, now obvious to
even the casual observer, has reinforced pervasive doubts about the Center’s
political strength and will.
In short, the Center has only a minimal capacity to mobilize - or extract
- resources for national purposes, either at home or abroad, and that
capacity continues to erode.
Where has all the Power Gone?
If the Center no longer wields much power, what has happened to the vast
quantity of it the Soviet state once had?
Some of it has simply dissipated: There is no law of the conservation of
power in politics analogous to the conservation of energy in physics. Some
has been picked up by criminal elements, although the quantity is much
exaggerated in the West. Some of it is lying around in the streets,
although, unlike the situation in 1917, there is hardly enough to make a
revolution and there appear to be no forces both willing and able to pick it
up. It is striking how little political energy there is in Russia today -
whatever energy there is has been directed toward private pursuits, to
survive for most Russians, to gather or protect great riches for the
privileged few. Despite the Communists’ victory over Yeltsin last week in
the selection of a new Prime Minister, they lack the leaders, ideas, and
will to mobilize this energy; the more dynamic nationalist, or patriotic,
forces are too few and too disorganized for that task; and the anti-Yeltsin
democratic opposition lacks the necessary organization.
The overwhelming bulk of power has flowed to, or been seized by, two
related groups of political/economic actors, big business and the regional
Much attention has been devoted to the so-called “oligarchs,” a small
group of politically plugged-in businessmen, who manage huge
financial-industrial empires and who in the popular imagination exercise
inordinate influence over the government. They do exercise significant
influence, and tellingly, their structures resemble mini-states (they
exercise political power through their control of government positions,
industrial and financial assets, mass media, and instruments of coercion).
They undoubtedly corrupted the privatization process to their own advantage,
acquiring some of the potentially most lucrative assets for cut-rate prices,
and they accumulated wealth in large part by feeding off the state budget.
Their influence, however, has been much exaggerated, and amplified by the
media they own. Indeed, the choice of Primakov as the new Prime Minister,
against the wishes of some key oligarchs, underscores their limits.
Focusing on a few superrich Moscow-based oligarchs, however, obscures the
emergence of a class of simply rich big businessmen, many at the heads of
regional financial-industrial groups, that control much of the country’s
productive enterprises. Individually and collectively, these men exert
considerable influence on central, regional, and municipal authorities. In
many cases, they provide some of the few sources of revenue for regional and
local governments. As a rule, they are inextricably intertwined with
regional political elites.
Indeed, the regional political elites have been the biggest winners as
the Center crumbled. In the early nineties, they stepped into the vacuum
created by the collapse of the Communist Party of the Soviet Union (CPSU),
which had administered the Soviet state. They gradually consolidated their
power by taking advantage of the internecine elite struggles in Moscow. The
popular election of regional leaders - completed with a few exceptions in
early 1997 - enhanced their legitimacy on the regional level and their
autonomy vis-ŕ-vis the Center. Chechnya is the extreme example, having
become independent de facto over the past year, but others now routinely
ignore Presidential and government decrees, federal law, and even the
Constitution, when they find them to their disliking.
The Center is not powerless against these new bearers of power and
authority. As Berezovskiy has stressed, the state can crush any of the
oligarchs it wants at any time. But there are limits. In particular, it is
almost certainly beyond the Center’s power to take on all the oligarchs at
once or big business as a class. Moreover, the Center has had little
success in dislodging regional leaders even in isolation from one another.
Primorskiy Kray Governor Nazdratenko, for example, held on despite a
concerted effort by the Center to remove him that lasted over a year. Most
important as far as the future of Russia is concerned, the balance between
the Center and these new bearers of power and authority continues to move
against the Center.
The Consequences of a Withering Center
Indeed, for one of the few times in Russian history, the bulk of power
and authority lies outside the Center. And in stark contrast to those few
other periods, the forces that would recentralize and reconcentrate power
appear exceedingly weak today. There is no significant concentration of
power prepared to seize and shore up the Center. There are no Bolsheviks or
Whites waging warfare across the country for the right to recentralize power
and rule Russia. Given these circumstances and the current crisis, without
predicting the final withering away of the Center, it is worth considering
at a minimum the consequences of the continuation and deepening of current
trends. In other words, what happens as the Center withers?
Much, of course, will depend on exactly how the process unfolds - is it
abrupt or gradual, peaceful or violent - and the innumerable variables
preclude precise answers. It is clear, however, that the process will have
important consequences for a number of issues of utmost concern to the rest
of the world and the West in particular. For the most part, they are the
same ones that commanded our attention as the Soviet Union broke up, for
Command and control of Russia’s nuclear, biological, and chemical weapons
arsenal and the material and technology to build them.
The conduct of Russian foreign policy, including what to do with Russia’s
seats in international organizations, most importantly in the UN Security
The command and control of Russian Federation military forces located
outside of Russia.
Responsibility for Russian Federation debt.
The ownership of property abroad now belonging to the Russian Federation.
Moreover, dealing with these problems will be potentially more difficult
than it was during the late Soviet period because there will be more actors
(89 Russian regions as opposed to 15 Soviet republics) less experienced in
security matters and foreign affairs.
But the similarity of the problems should not lead us to the false
conclusion that the withering of the Center will inevitably precipitate the
break up of Russia, much as the Soviet Union broke up seven years ago.
There are three critical differences between Russia and the Soviet Union in
First, outside of Chechnya and one or two other places in the North
Caucasus, there are no serious separatist movements in Russia. Regional
leaders are seeking greater autonomy within Russia, not independence; some
even harbor ambitions of one day becoming Russia’s president. By contrast,
several powerful independence movements emerged in the Soviet Union in the
late eighties, most notably in Ukraine, the second most important republic,
Second, the population is remarkably quiescent; it cannot be mobilized
easily against the regime. By contrast, in the Soviet Union, independence
leaders had mobilized considerable segments of the population, especially in
Ukraine, Transcaucasia, and the Baltics. In Russia, especially in Moscow,
large-scale anti-CSPU demonstrations were frequent occurrences.
Third, foreign forces working for the break up of Russia have few
supports within Russia. By contrast, diasporas in Europe and the United
States linked up with their co-nationals in Soviet Union as part of the
independence movements. They also exerted considerable pressure on
governments in Europe and the United States to support those independence
In addition, the international environment remains benign as far as
Russia’s territorial integrity is concerned. Russian strategists themselves
see no serious foreign threat for the next decade or more. Over the next
few years at least, there appear to be no states prepared to exploit even a
radically weaker Russia for the purposes of territorial aggrandizement,
although some would undoubtedly operate more boldly in other parts of the
former Soviet Union (e.g., Turkey in Azerbaijan and Central Asia). Most
neighboring states are absorbed with their own domestic problems (e.g.,
Iran, China) or rivalries with states other than Russia (e.g. Pakistan and
India). Moreover, the United States, Japan, and European powers have no
interest in the break up of Russia and would almost certainly seek to reduce
threats to the integrity of a weakening Russian state.
A Weakening Center as an Opportunity
In a benign international context, a weakening Center could, contrary to
widespread opinion in the West and the fears of Moscow elites, provide a
major opportunity for rebuilding Russia - and, for the first time in the
country’s history, from the bottom up as a genuine federation. The increase
in power outside the Center has given regional elites greater latitude to
experiment with socio-economic and political arrangements to find what works
locally. Despite the deep problems laid bare by the current crisis, some -
Moscow, St. Petersburg, Saratov, Samara, and Perm, for example - have still
made notable progress in building markets or fostering a pluralist political
environment, although success in one area does not necessarily overlap with
success in the other; other regional elites have made little progress in
either area. Over time, the successful regions will presumably have a
demonstration effect on the laggards, which will eventually absorb the
appropriate lessons. This would ultimately create the foundation for the
revival of Russia as a whole in the form of a genuine federal state.
Of course, even in this scenario a Center of some sort is desirable, one
that can prevent the emergence of the types of problems we faced in dealing
with the breakup of the Soviet Union. But it would be a minimal Center,
focused on a few core responsibilities, such as foreign policy, command and
control of the nuclear arsenal, maintenance of a military for territorial
defense, regulation of inter-regional trade, and management of the monetary
system. And it would preferable that the Center itself took the initiative
in proposing its own downsizing, for it lacks the resources to halt the
crumbling at its current level of power. Its best hope for eventually
stemming its loss of power is to get out in front of the process and stake
out a position that it can reasonably defend.
In many ways, the crisis of power and authority in Russia today is the
objective outcome of socio-economic and political trends of the past decade
or more and of the Center’s blindness to their potency and its slowness in
reacting to them. To be sure, the Southeast Asian financial crisis and the
collapse of oil prices, as well as Yeltsin’s firing of the Chernomyrdin and
Kiriyenko governments, accelerated the onset of the crisis and deepened it.
But the crumbling of the Center began long ago, and it was becoming
increasingly vulnerable to the kind of shocks it has suffered over the past
This turn of events is not necessarily bad if it focuses attention on the
current structure of power and the Center and the Moscow elites seize the
opportunity to rethink what structure is appropriate to Russia over the long
run. So far, however, they have not done so. Rather, they appear to think
that the crisis can be solved by the Center alone. They have yet to make
big business as a class or the regional elites partners in the solution of
this problem. In short, they have failed to recognize the actual
distribution of power and have overestimated their share.
Whether Primakov’s government will take a different tact remains to be
seen. In his remarks before the Duma September 11, he noted there was a
danger of Russia's splitting up and underscored his opposition to efforts to
weaken or ignore the central leadership. At the same time, he promised to
name some governors to the government's presidium, which would give them a
direct voice in government policy-making. If he reaches out to the regional
elites, he has a chance of slowing down, if not reversing in the near
future, the crumbling of the Center. If he does not, he will only ensure
that the current crisis will not be the last and that the next one will be
September 17, 1998
Appointments Widen Split in Cabinet
By David McHugh
The ideological cracks in Prime Minister Yevgeny Primakov's new Cabinet
widened Wednesday, as moderate economic reformers who seem destined to clash
with Communist-backed ministers joined the government.
President Boris Yeltsin appointed Duma Deputy Vladimir Ryzhkov as deputy prime
minister in charge of social policy and Vladimir Bulgak, a minister in the
previous Cabinet, as deputy prime minister for industry and communications.
Ryzhkov is a member of the centrist Our Home Is Russia party headed by former
Prime Minister Viktor Chernomyrdin. He joins the head of Our Home Is Russia,
Alexander Shokhin, who was appointed deputy prime minister for government
Although Bulgak has been a low-profile technocrat, Shokhin and Ryzhkov seemed
certain to clash with new Central Bank chairman Viktor Gerashchenko, a
supporter of expanding the money supply, and First Deputy Prime Minister Yury
Maslyukov, a Soviet-era economic planner.
Western governments, foreign investors and the International Monetary Fund are
waiting to see in what direction Primakov takes the new government. Primakov,
a compromise candidate confirmed by the State Duma, the lower house of
parliament, on Friday, has yet to spell out concrete policies, though he has
said there needs to be more state control over the economy.
Although the bulk of the Cabinet is yet to be appointed, several political
analysts said it was already clear the new government would inevitably be at
war with itself. The Kommersant Daily newspaper used the term dvoyevlastiye,
or divided power, to describe the arrangement and wrote that "two poles have
formed in the government."
Political analyst Boris Kagarlitsky said the government was a coalition that
reflects the broad array of groups, including left-wing, centrist and liberal
parties, that agreed to support Primakov, chosen by Yeltsin after the
opposition forced him to drop his first choice, Chernomyrdin.
"They are definitely creating a push and pull government," Kagarlitsky said.
"It's totally irrational from the point of view of practical governing. ...
But, on the other hand, for the time being, that will allow Primakov to please
Kagarlitsky gave the arrangement two or three months, "and then they will have
some kind of crisis because they won't be able to do anything substantial,
they'll reorganize it, and one of the groups will push aside the other one."
Kagarlitsky and several others said there appeared to have been a deal struck
to give Our Home Is Russia several Cabinet seats, though Shokhin denied that
at a news conference.
Shokhin was a little less unequivocal about opposing inflationary monetary
policy, saying that what was needed was "reasonable management of the money
supply" that would avoid excessive inflation. He said it was more important to
restore cash to the insolvent banking system than to just run the printing
press to pay salary arrears to government workers.
He said Russia's prospects for getting the next, $4.3 billion installment of
its $22.6 million IMF bailout -- conditional on meeting budgetary and
inflation targets -- were "less than sunny."
He said Primakov had appointed him to represent Russia in discussions with the
IMF. Shokhin has previous experience as a foreign debt negotiator, having led
talks with Western creditors in 1994.
Alexander Gubarev, an economist with CAIB, an investment bank, said the
balance of power wasn't clear because Primakov had not taken one side or the
Gubarev said one worrying sign for foreign lenders was Primakov's statement
that he would "rely" on the economic plan drawn up by Soviet-era economist
Leonid Abalkin. The plan calls for limited monetary emissions, a plus for the
IMF, but it also calls for the indexing of wages to inflation, which is likely
to hurt the budget, and strict control over hard currency export revenues, a
move that smacks of state planning.
"If Primakov shares Abalkin's views he will not allow Shokhin to seriously
affect economic policy," Gubarev said.
"I think part of the reason for Shokhin's appointment is that he is a good
figure to talk to the IMF and the West," Gubarev said.
A key but unresolved personnel question was who would serve as head of the
state tax service. Currently, it is headed by Boris Fyodorov, an
uncompromising free-marketeer who by all accounts would clash immediately with
Maslyukov. Interfax reported Wednesday that Fyodorov would be replaced by
Georgy Boos, a Duma deputy from Our Home Is Russia, but that was not
immediately confirmed by the Kremlin.
The departure of Fyodorov would be a clear sign of a sharper turn to the left,
Primakov To Be Nonpolitical Premier
10 September 1998
[translation for personal use only]
Article by Yuriy Zaynashev: "James Bond in Russia: Yevgeniy
Primakov--the Spy Who Has Come in From the Woods"
Had Primakov not observed the ethics of office and had he not
officially declined the post of chairman in the government, his
chances would have been zero. But precisely because Primakov
declined, power could, on the contrary, end up in his experienced
hands. Yevgeniy Primakov is by no means putting on airs, what is
more--he is simply an educated, wise government official, he
observes ethics, and for this reason primarily would on no account
without the President's command be hitching a ride to theDuma.
Expelled from the Kremlin in 1991, Primakov calmly set off for
the residence of the Foreign Intelligence Service, "to the woods,"
and was content with his lot. He did not get into political fights
and did not undermine his ministerial cabinet colleagues and calmly
carried out his immediate duties, and Yeltsin was content.
Primakov has achieved an astonishing result--he is blessed in
the State Duma by three factions out of the four--the Communists,
the Yavlinskiyites, and NDR. No other statesman in the country can
boast of such recognition. He impressively saved Moscow's reputation
at the time of the dispute over the expansion of NATO and
consolidated our positions at the time of the crisis in Iraq. True,
he has not achieved a noticeable rapprochement with our CIS
neighbors. But, all the same, were Yeltsin to offer him the
nomination tomorrow, it would pass.
Of course, Primakov is not suited to the role of prime
minister. He is not versed in economics as a premier should be
today. Many people doubt that he is capable of strict determined
decisions, capable of "forcing" them through the recalcitrant
bureaucratic machine. Primakov is not to the liking of extreme
democrats, of course. He does not bow to the West and bears an
outward resemblance to Brezhnev, and he continues to drag behind him
the train of "friendship with Saddam."
But Primakov is not straining after the office of president.
He is practically unelectable. Primakov is loyal to the President.
And Yeltsin will not today be choosing the ideal premier. Yeltsin
has to choose the lesser of two evils.
If Chernomyrdin is "submitted" for the third time, it will be
necessary either to break up the State Duma or to contemplate,
seated in the Kremlin, the procedure of his own impeachment. In any
event, in the coming months the ruble would fall doggedly, the
country would collapse, and the people would become embittered. To
be reconciled with the State Duma and to save the ruble and,
together with it, the state itself it could be that Yeltsin will
have left one sole, optimum alternative--Primakov takes charge of
the government, the crisis of power ends, and Chernomyrdin agrees to
the position of first vice premier for the economy. By a gentleman's
agreement Primakov would not interfere in the policy of his deputy.
It was such an option, possibly, that was at issue at Gorki-9, where
Yeltsin invited Chernomyrdin and Primakov.
With this development of events, Chernomyrdin's chances at the
elections of the year 2000 are not diminished--it could well be just
the opposite. Viktor Stepanovich shows that what is on his mind is
not power in and of itself but the fate of the country, and for this
reason he bows to Primakov and agrees to a demotion.
And Primakov and Chernomyrdin should get on, as a matter of
fact--they are both people of a Soviet stamp and attended the school
of the Central Committee. In addition Yevgeniy Maksimovich bore a
tremendous sorrow in the 1980s--his wife and son died in an
automobile accident. His life has clearly not been easy. And why, in
fact, is Primakov--a super intelligence officer--not capable of
determined decisions? Shtirlitz's work does not brookspinelessness.
Russian media feel pinch in economic crisis
By Andrei Khalip
MOSCOW, Sept 16 (Reuters) - Russia's long powerful and lucrative media are
feeling the squeeze in the country's economic crisis.
Television channels and newspapers often reflect the views of their "oligarch"
owners, such as magnate Boris Berezovsky, and have been hugely influential in
Russian politics, most notably in helping to re-elect President Boris Yeltsin
Now the media have seen a slump in advertising revenue that has forced them to
cut costs and mull mergers, although it remains to be seen whether their
influence is also waning.
"Last week they took away my cellular phone I used for work," said a
journalist with one of Moscow's big newspapers. "They say it's cost-cutting
due to the crisis."
For others, much more is at stake.
The venerable newspaper Izvestia is considering a merger with the newcomer
daily Russky Telegraf, officials said.
Vadim Goryainov, head of the Profmedia company which owns more than 50 percent
in each paper, told Reuters Izvestia shareholders would discuss several merger
Many newspapers and television channels have already significantly cut staff
salaries and warned of possible sackings if the decline in business continues,
Russian media, state-run and virtually advert-free in Soviet times, lost most
state support after 1991 as Russia set itself on a free market course. Since
then, advertising has propelled many magazines, newspapers and particularly
television channels to prosperity and influence.
Hundreds of advertising agencies, either making adverts or simply re-selling
and placing them, also flourished.
Russia's severe economic woes have now hit all businesses and people's buying
ability. As a result, crisis-stricken firms, both Russian and foreign, can no
longer afford advertising, damaging broadcasters, printers and advertisement
"Many things will start from square one," said Sergei Lisovsky, one of
Russia's most influential advertising tycoons, in an interview with the
Kommersant Daily business newspaper.
"Advertising budgets for the rest of this year have been lost. Those for the
first half of 1999 have also been lost because they are being budgeted now,"
said Lisovsky, who heads the Premier SV group.
Advertisers say order volumes have fallen by up to 80 percent. Major foreign
players are in wait-and-see mode.
Lisovsky predicted mergers, takeovers and even bankruptcies in the media, but
said "big names" in the press would survive.
Advert-filled glossy fashion magazines could lose some of their shine. Some of
them have already sacked staff or sent them on paid holidays.
The Literaturnaya Gazeta weekly newspaper noted ironically that the recent
launch of the Russian-language edition of Vogue magazine had been marked with
a big jamboree.
"The large-scale advertising of newcomer Vogue, 'which finally came to Russia'
looks a lot like fiddling while Rome burns," it said. Vogue officials were not
available for comment.
Plans by MTV Music Television to launch its service in Russia on September 25
remain unaffected by the crisis, but project spokesman Andrei Afanasyev told
Reuters there would be no celebration to mark the network's opening, which was
initially planned in the Manezh hall next to the Kremlin.
"Unfortunately we cannot do it. A big party would look strange," he said. "We
have postponed it until better times."
Television channels have been forced to cut advertising rates by up to 80
percent. Advertisers said most channels would soon be unable to fund shows or
buy foreign films.
So far there have been few changes in media advertising, although commercial
breaks during films have become slightly shorter and some newspapers have
seemed somewhat slimmer.
"Broadcasters will be playing the same ads for some time even if they had not
been paid. They consider it a face-saving solution, something that is supposed
to convince people that everything is fine," said one advertising manager.
"But things are not fine. Soon archives will come in handy -- Soviet-era
television dramas and cartoons. Cheap foreign productions will also flood the